Merchant accounts allow businesses to accept payment by credit cards and other payment instruments that rely on remote validation and/or transaction processing. For convenience, merchant accounts will be described in the context of credit cards. Nevertheless, it should be understood that merchant accounts may also be used in connection with other payment instruments that rely on remote payment-source validation and/or transaction processing, such as debit cards, smart cards, wire transfers, money orders, traveler's checks, personal checks, and various types of e-money. In fact, the merchant accounts described in this specification may be used in connection with any type of financial transaction system that uses some type of remote payment-source validation and/or remote transaction processing.
Basically, a “merchant account” is a contractual arrangement between a merchant and an “acquirer,” such as First Data Merchant Services, that remotely processes financial transactions conducted by the merchant. For example, the merchant accepts credit-card transactions as payment for goods or services provided to its customers, and the acquirer performs the services of remote credit card validation and transaction processing. Typically, the merchant enters information from the magnetic strip on the credit card into a point-of-sale terminal using a “card swipe” reader or a keypad on the terminal. In response, the terminal automatically places a telephone call to the acquirer's computer system, which performs the validation and transaction processing operations. Specifically, if the credit card is validated, the acquirer charges the cost of the transaction to the customer's credit card account, and credits the corresponding value to the merchant's account. To provide these services, the acquirer maintains contractual relationships and electronic communication capabilities with all or many of the major credit card issuers. This allows the acquirer to validate the credit cards and process the transactions in “real time” at the time of the transaction. For this service, the acquirer charges a small fee per transaction.
To establish this type of merchant account, the merchant typically applies for the account by filling out a written application. The merchant account application includes information relating to the type of business, its location, sales data, owners, bank accounts, authorization to pay for the merchant account services, and so forth. After receiving the written application, the acquirer manually transcribes the information from the application into the acquirer's computer system. The acquirer then conducts a credit check and, based on the merchant's credit rating and type of business, determines a fee schedule and associated terms and conditions for providing the merchant account services. The acquirer then incorporates this information into a written contract, which is delivered to the merchant.
If the merchant agrees to the fee schedule and associated terms and conditions, the merchant signs the contract and returns it to the acquirer. At this point, the merchant may also order one or more point-of-sale terminals from the acquirer for use in accepting credit card payments. To enable the acquirer's computer system to communicate with each point-of-sale terminal, the merchant obtains telephone service for each point-of-sale terminal and specifies the associated telephone directory number for each point-of-sale terminal. Upon receipt of the executed contract and the point-of-sale equipment order, the acquirer assigns the merchant a “Merchant Identification Number” (MID). The acquirer also assigns each point-of-sale terminal a “Terminal Identification Number” (TID), loads operating software onto the point-of-sale terminals, and configures each terminal with the associated MID/TID and the appropriate telephone number for accessing the acquirer's computer system.
The acquirer also provisions its master account file with a record for the new merchant account, including the MID/TID information, the telephone directory number assigned to each point-of-sale terminal (or alternatively using network codes), and other information related to the operation of the account, such as accounting and billing schedules. The acquirer is now ready to receive and process credit card transactions for the merchant account via telephone calls placed from the merchant's point-of-sale terminals to the telephone number assigned to the acquirer's computer system. In addition, the acquirer has the ability to place telephone calls to remotely access the point-of-sale terminals. This allows the acquirer to reconfigure each point-of-sale terminal, for example by downloading new operating software, changing the MID/TID data, altering the telephone number for accessing the acquirer's computer system, and so forth. This may include alteration of file layouts for sending or receiving data transmissions.
The acquirer then ships the point-of-sale terminals to the merchant, who connects each terminal to its associated telephone line or wireless unit. The merchant is now ready to begin accepting credit card transactions. It should be noted that as an alternative to obtaining new point-of-sale equipment as described above, the merchant may use existing point-of-sale equipment. For example, the merchant may already own one or more point-of-sale terminals for use in a new merchant account relationship. In this case, the acquirer may remotely reprogram each point-of-sale terminal by placing a telephone call to the terminal and downloading new operating software and/or configuration data. Alternatively, the merchant may ship the terminals to the acquirer for reprogramming. That is, there are several methods for authorizing a merchant to use a merchant account and ensuring that the MID/TID and telephone information maintained in the merchant's point-of-sale terminal is consistent with that maintained in the acquirer's master account file. The process of accomplishing this result is known as “activating” the merchant account for credit-card transactions.
Although the activation process described above has worked well, it can take several days or weeks to complete. In particular, the use of the mail to deliver the merchant account application to the merchant, and then to receive the completed application from the merchant, typically takes about a week. The data transcription and approval process often takes another week. The process of configuring and delivering one or more point-of-sale terminals to the merchant may take yet another week. In today's world of e-commerce and fast-paced business decisions, this old-world merchant account activation system may unnecessarily delay the start up of new business ventures. Therefore, there is a need for a faster and more efficient system for activating merchant accounts.